2017 (9) TMI 116 - AT - Income Tax

Addition u/s 68 - onus of proving the claim - Held that - It is well settled law that onus of proving the claim is initially on the assessee but the burden shifts on the A.O. when the assessee discharged its primary onus. In the present case, the assessee had fully discharged its primary onus by submitting the relevant and cogent evidences before A.O. to establish the genuineness of the transaction in the matter. The A.O. however, did not do so anything in the matter and has not pointed out how the claim of assessee was factually incorrect. Simply because the share applicant company did not have sufficient income would not prove the case of the A.O. because the share applicant company has huge worth to make investment in assessee-company. The assessee thus, proved the identity of share applicant, its creditworthiness and genuineness of the transaction in the matter. - Decided in favour of assessee.

Summary

Issues Involved:
1. Reopening of the assessment under section 147 of the I.T. Act.
2. Addition of ?6 lakhs (A.Y. 2005-2006) and ?7 lakhs (A.Y. 2006-2007) under section 68 of the I.T. Act.

Detailed Analysis:

1. Reopening of the Assessment under Section 147:
The assessee challenged the reopening of the assessment under section 147 of the I.T. Act. The Assessing Officer (A.O.) recorded reasons that the assessee’s income had escaped assessment to the tune of ?6 lakhs for A.Y. 2005-2006 and ?7 lakhs for A.Y. 2006-2007, leading to the issuance of notice under section 148. The assessee responded by treating the originally filed return as filed in response to the notice.

2. Addition under Section 68 of the I.T. Act:
The primary issue was the addition of ?6 lakhs for A.Y. 2005-2006 and ?7 lakhs for A.Y. 2006-2007 under section 68 of the I.T. Act. The A.O. received information that the assessee had taken accommodation entries from companies floated by Shri Asheem Gupta. The A.O. made the addition after failing to verify the genuineness of the transactions through notices issued under section 133(6).

Assessee’s Arguments:
The assessee provided substantial evidence to prove the genuineness of the transactions:
- Balance-sheet, computation of income, return of income, audited balance-sheet, confirmation from M/s. Moderate Credit Corporation Pvt. Ltd., share application form, copy of their income tax return, bank statement, and ROC certificate.
- M/s. Moderate Credit Corporation Pvt. Ltd. confirmed the transactions directly to the A.O. and provided supporting documents.
- The company was listed with the Delhi Stock Exchange, registered with ROC, and RBI, and had sufficient net worth to make the investment.

Citations and Legal Precedents:
- Delhi High Court in CIT vs. Vrindavan Farms P. Ltd.: The court held that the assessee had discharged its initial onus by providing sufficient documentation, and it was incumbent upon the A.O. to undertake further inquiry.
- Pr. CIT vs. M/s. Goodview Trading Pvt. Ltd.: The court emphasized that the A.O. should conduct a deeper analysis rather than relying on minimal or insubstantial amounts paid as tax by share applicants.
- ITAT, Delhi Bench in Prabhatam Investment P. Ltd. vs. ACIT: Confirmed that the genuineness of transactions was established when share application money was received through account payee cheques and supported by relevant documents.

Revenue’s Arguments:
The Revenue relied on various judgments where the burden of proving the genuineness of cash credits was on the assessee:
- ITO vs. M/s. SBS Properties and Finvest P. Ltd.: The Tribunal held that the assessee had not discharged the burden to prove the genuineness and creditworthiness of the share application companies.
- CIT vs. Jansampark Advertising & Marketing P. Ltd.: It was held that proper scrutiny of the material was essential, and the obligation to conduct proper inquiry shifted to the Commissioner (Appeals) and Tribunal if the A.O. failed to do so.

Tribunal’s Findings:
- The Tribunal found that the A.O. did not provide any evidence connecting Shri Asheem Gupta with the share applicant company.
- The assessee had provided sufficient evidence to prove the identity, creditworthiness, and genuineness of the transactions.
- The A.O. failed to conduct further inquiry despite the evidence provided by the assessee and the direct confirmation from M/s. Moderate Credit Corporation Pvt. Ltd.
- The Tribunal concluded that the addition under section 68 was unjustified and deleted the addition of ?6 lakhs for A.Y. 2005-2006 and ?7 lakhs for A.Y. 2006-2007.

Conclusion:
The appeals for both A.Y. 2005-2006 and 2006-2007 were allowed, with the Tribunal setting aside the orders of the authorities below and deleting the additions made under section 68 of the I.T. Act. The issue of reopening the assessment was deemed academic and not further adjudicated.